When you walk into the Ojai Valley Inn & Spa's $75-a-head Maravilla restaurant, you probably won't be told that the statuesque woman who seats you also painted the walls of your suite, or that the busboy installed the crown molding and the flower arranger wired the building's electrical panel. Nor will the menu mention that the slice of cake you order for dessert was decorated by the woman who welded the scrollwork on the iron balcony outside the window. But the Ojai Valley Inn may be the only resort hotel in the country that was actually built by its employees; it's certainly the only employee-built resort to make Condé Nast's Gold List.

Here's how it happened:

In 1937, Frank Capra chose a long shot of the dramatic Ojai Valley to stand in for Shangri-la in the movie Lost Horizon--and even the hotel itself was a strangely timeless place. It was originally built as a private golf club in 1923 by Ohio industrialist Edward Libbey, who hired architect-to-the-stars Wallace Neff to design a Mediterranean-influenced clubhouse with guest rooms. For a while it was a fashionable club for L.A.'s elite. Then, for a longer while, it wasn't. In 1987 the Crown family, longtime club members from Chicago, bought out the other members and turned the property into a resort hotel.

When managing director Thad Hyland first saw the inn, it still had a shabby-genteel charm about it. "Ten years ago we were a golf resort for retirees at $90 a night," he says. "And we didn't have any money. But that's the best place to be at, having to be creative. All great ideas come on a shoestring."

Hyland persuaded the Crowns to build a lavish, Moroccan-themed spa. He also added restaurants and new, unusual services. Now you could send your kid on a fishing trip and spend an afternoon walking the maze in the meditation garden, or an afternoon on a horseback ride guided by the cowboy who used to tend the sultan of Brunei's stables. (The sultan's wives could sometimes be found occupying the spa's $5,400-a-night penthouse suite.) Within a few years, Hyland had done for the Ojai Valley Inn what Tom Ford did for the house of Gucci; he took a venerable if somewhat musty brand and turned it into one of the hottest in the country.

But by early 2002, Hyland was facing a dilemma, as was every other manager in the domestic travel industry: how to weather the precipitous drop in business following 9/11. While many of his peers lowered rates and launched special promotions, Hyland decided that the best move for the inn's long-term prosperity would be to shut it down. Not completely, and not forever, but long enough to undertake a top-down, ground-up renovation of the 80-year-old property, which was growing ever creakier despite its newfound glamour. "It was the chance to do it all at once," says Hyland, who has a passion for building and renovating, probably because his father is a fifth-generation architect. "At many hotels you see those construction signs that say, 'Pardon our dust.' Well, nobody really pardons your dust."

But as big a problem as the tourism slump was for Hyland, shutting down 140 of the hotel's 207 rooms and five of its six restaurants was going to be an outright catastrophe for the staff. A lot of coastal resort hotels provide transient employment to immigrants entering the work force and young people looking for a job that is compatible with surfing. Not Ojai Valley. The inn's location and culture make it different.

Reviving a Faded Beauty

By 2002, the inn had become fashionable all over again, but it needed major repairs. The question was what to do with staffers while the work was being done. "To re-create a staff like this, with their level of training and experience, would take 15 years," says managing director Thad Hyland.

Ojai is a sleepy town of 8,000, isolated despite being just 73 miles from Los Angeles. Ringed by dramatic mountains, it sits 700 feet and half an hour of winding two-lane highway above the Pacific coast. It has retained its charm in part because it is not freeway-close or commuter-friendly. The inn is the town's largest employer, deeply woven into the social--and financial--fabric of the local culture. "We were talking about 550 jobs," says Hyland, "but that really represents 2,200 lives when you count whole families. When you find out that the school district is worrying about losing funding because they've heard you might close, you see that everything is connected."

Many of the employees had been at the inn for decades. Some had never worked anywhere else. "How do you tell 81-year-old Millie Reeves, after 36 years on the floor as a waitress, 'I'm sorry, you don't have a job'? I can't do that. And the owners didn't want to do that because they have known these people all their lives, too."

Hyland recognized that this human infrastructure was literally irreplaceable--both culturally and economically. "The selfish side of the equation," he says, "is that to re-create a staff like this, with their level of training and experience, would take 15 years."

Georgia Deutsch, Ojai's florist, learned to pull Ethernet cables.

If there was anyone left in town to train, that is. A recent run on real estate had turned Ojai into a popular Malibu alternative; nouveau townies like Ted Danson and Larry Hagman had led the charge that drove property prices through the roof. During the inn's renovation, the least expensive home for sale in the area was a 650-square-foot ramshackle cottage in Oak View, where many working folk currently live; it was listed at just under half a million. Many of the service workers who lost their jobs would have to leave town, and once they left, there simply wouldn't be any affordable housing for them to return to.

So Hyland set about figuring out a way to both close the inn and keep on as many employees as possible. He worked with other top hotels to find temporary placements for some, a program he describes as "a kind of junior year abroad." He helped others apply to college. Then he had another idea: Why not let some of them help out with the renovation itself?

"When Thad suggested that we retrain the hotel employees to do the renovation work, I thought it was a nice idea that would never work, and I said so," says Brian Skaggs, chief engineer on the $70 million renovation project. But he agreed to try. "And I'm happy to say that I couldn't have been more wrong."

"We started out by saying, 'We can paint," says Hyland. "Then we realized we could plaster. It gained momentum. When we studied it, we realized these people were very trainable. And at some point, the light bulb went on: We could use all of them."

An outside contractor was hired to build out a hundred new rooms, and Hyland's employees took on the entire renovation project for the rest of the property. The hardest part wasn't training them to do the work, but figuring out what to pay them. "We didn't want people who had done well, like a tipped waiter, earning a lot less than they did before," Hyland says. "But we also didn't want someone who was doing the same job beside them, but had come out of housekeeping, to get a lower wage." In the end, the solution was to match up the wages with outside industry--"what someone might get working for a real painting contractor."

In May 2003, when the company gathered everyone together for an official announcement of the upcoming closure, Hyland was able to offer every employee a challenge instead of a pink slip. Around 75% of them took him up on it. "When they got to work," Hyland says, "we gave each of them a metal lunchbox with a thermos of Campbell's soup in it and a T-shirt that said 'Building a better Shangri-la."

Cook Yolanda Mora took up a torch, welding the wrought iron balconies of Ojai.

During a visit to the hotel in late 2004, the grounds looked like any other busy construction site. Yolanda Mora, a mother of two, stood behind a curtain of orange fireworks, welding rungs onto a balcony railing. She doesn't speak very much English but said through a translator that she in fact preferred making wrought iron to making salads. "Maybe she can torch the crème brûlée when the restaurant opens up again," Hyland said, tipping his hard hat to Mora, who beamed back at him through her mask before returning to her torch work.

"The ironworks has been so successful, and the quality of the work so high," said Hyland, "that when the contractor building the new rooms noted our work, he commissioned us over an outside company to do all of the railings for the new building, too. We're pretty new to the iron business, but we won a contract on our own merits."

He shook his head and smiled. "I'm thinking maybe we can drop this whole hotel thing--it's too hard. We could just have an ironworks and a painting company. And we can all golf in our off time."

Upstairs in the main building, where the renovated guest rooms would be, Hector Zepeda from room service worked at hanging crown molding, while Ruthie Dimmick prepped for painting. Dimmick waited tables at Maravilla for 12 years and never thought she'd be doing anything like this. She had recently won a promotion to crew foreperson. "There have been a lot of unexpected benefits to this," she said, taking a break from taping and spackling. "For one, we have all grown closer. And then we realized we have all these new skills and might as well use them. Now we go to each other's houses on the weekend to lay tile and paint. Everyone's getting a home renovation."

Ruthie Dimmick, a waitress painted walls. "Now we go to each other's houses on the weekend to lay tile and paint," Dimmick says.

Hyland ranged through the site, pointing out features and naming the people who'd done the work with the enthusiasm of a theater director. "We pulled all the wires for the new high-speed fiber-optic network ourselves," he said. "Our Ethernet was installed by a flower arranger....The pastry department is great at plastering!"

Hyland's employee-retention program was working so well that he took another chance midway through the project, when the Orange County company responsible for manufacturing all the interior doors went bankrupt. Hyland decided he didn't want to wait for the courts to sort it all out, so he simply rented a truck and drove to Orange County, planning to pick up the raw materials he'd already paid for. When he got to the factory and heard the whole story from the door company's newly jobless employees, he bought the factory equipment, loaded it up along with his wood, and took everyone back to Ojai.

He set up a door factory in the grand ballroom, and allowed the Orange County carpenters to sleep at the inn during the week. "It gives them another six months of employment," Hyland said. "And who knows? Some of them may want to stay. We'll need doormen. And if they can build them, I'm sure they can open them."

Hyland anticipated that many of his original employees would move on with their new skills. "Some folks might want to go out and become a tile layer or painting contractor for $22 an hour," he said. "And some of the people who went into our farm program--well, the Four Seasons doesn't want to let go of them now. We don't expect everyone to come back. But we kept our part of the bargain."

And the employees, as it turned out, kept theirs. The renovated Ojai Valley Inn & Spa opened up again in June. Painter Ruthie Dimmick has gone back to food service, her promotion to the management level intact. Georgia Deutsch, who pulled Ethernet cable, is arranging flowers again, and Yolanda Mora has hung up her torch and returned to her salad prep post.

In all, there has been very little attrition among the employees, considering that most of them acquired better-paying skills during the renovation. Thad Hyland knew that for the Ojai Valley Inn to be a wonderful place to stay, it first had to be a wonderful place to work. That's what underlies its 30% return rate among guests. Training the hotel workers to do construction work did cost more than hiring outside contractors would have.

Or maybe it didn't.

What makes for a real luxury hotel? It's when you come back for your 10th anniversary, and the desk clerk who checks you in remembers you from your honeymoon. It's when your last night is quietly comped by a concierge who knows you spent your weekend in bed with a wicked flu. And if you've never had your room opened for you by a career bellman, one who has bought a home and put his kids through school by putting chocolates on pillows, the difference in the quality of service is palpable. Staying at the Ojai Valley Inn is like buying a Buick was in the 1950s, when you knew that every hand that touched that car on the production line belonged to a proud individual--someone who loved to work and was able to carve out his own little corner of Shangri-la by doing it.

Hillary Johnson is the founder of Kerabu, a start-up that will allow individuals to invest in microenterprises. She wrote about business blogs for the August issue.